Wednesday, May 14, 2008

Martin Erat's Contract Extension: REJECTED!

Just when Nashville Predators fans were celebrating Martin Erat's new contract extension, comes this big fat NO! from the NHL's Head Offices of Doom.

Per TSN.ca:Martin Erat's new seven-year, $31.5 contract with the Nashville Predators has been rejected by the NHL.

All that means is that it is likely to be re-jigged to conform to the CBA and re-submitted for approval.

Erat's contract was rejected because it violates a clause in the CBA that regulates year to year fluctuations in salary.

For example, if you take the first two years of contract, the higher salary in those two years can't be more than double of the lower salary. After that, the salary can't fluctuate up by more than 100% of the lower salary and can't fluctuate downward by more than 50% of lower salary.

On that basis, Erat's contract doesn't cut it on a number of levels.

For starters, the $5.25 million in the second year is more than two times the amount ($2.5 million) in the final year.

If the Preds and Erat re-allocate some of the dollars, the contract can be re-submitted for approval.

Contract Rejection:Martin Erat – contract rejected due to violation of 100% rule from 2012-13 season to 2013-14.

I'd expect, like TSN mentions, that the contract will simply be restructured and life will go on.

So, why the hell was this clause enacted in the first place?

If the total salary is spread evenly for the salary cap hit, what does it matter if Erat gets $500,000 one season and $10.5mil the next? Obviously, Erat agreed to the terms, and the Preds want the contract to mimic Erat's expected production path.

I'm guessing the prime reason is that the NHL wants to control salary inflation. Take these examples

Example 1: 08-09 $3mil09-10 $3mil10-11 $6mil11-12 $3mil

Example 2:08-09 $3.75mil09-10 $3.75mil10-11 $3.75mil11-12 $3.75mil

Now, the contracts are worth the same (not accounted for the time value of money, yada yada), but Example 1 could lead to problems.

Say a comparable player's contract is up for renewal after the 10-11 season, and he had the same exact stats are Martin Erat. Under Example 1, he could easily demand $6mil. Under Example 2, it would be much harder to demand $6mil, since Erat makes just $3.75m.

So, I guess this is simply the NHL's way of assuring that random-looking fluctuations don't lead to bigger contracts down the road.